How to Navigate a Windfall

It’s 3 p.m. on a Tuesday and I’m in a meeting at work when my phone buzzes with a text from my father: “check your bank account.” I subtly unlock my phone, open up the app, and there it is: Available Balance: $396,293.83. Exactly $394,552 more than this morning.

This is definitely not a typical Tuesday afternoon for me, so let me back up and tell you exactly how I lucked into this situation. When I was a young child, my grandmother gifted each of her children and grandchildren some stock in a privately held company that had been passed down to her by her mother. I enjoyed the modest quarterly dividends that the stock paid and appreciated them for the financial security blanket that they were. Last year, the company was acquired by a large multinational, and our shares were cashed out in a merger.

After the initial shock of that $394,552 infusion of cash wore off, it was time to figure out what to do with all those dollars.

First: Move the money.

When I filled out the merger paperwork, I put down my checking account for the wire transfer because the routing and account numbers were close at hand. I didn’t consider how I was going to get the funds into my savings, which reside at another bank. It turns out that my checking account bank limits online transfers to $10,000 daily, and wire transfers to $250,000 daily. Suddenly I realized that I could just write myself a check and deposit it into my savings account in person at a branch. I expected a sidelong glance from the teller — but this is New York City, where money flies around like sparrows, and she didn’t blink an eye.

Second: Pay estimated taxes.

I hired my parents’ tax accountant to determine the estimated tax payment I owed on the windfall, as well as prepare my 2018 return come April. He said I owed $6,500 in estimated taxes ($5,000 federal and $1,500 state) by September 2018. This was mysteriously different from what we had originally discussed via email (110 percent of the tax I paid last year) but he’s the pro, so I went with it. His communication skills were notably lacking, so I didn’t think I’d even get a clear answer if I tried to ask.

If it ends up that I underpaid, then I’ll pay a fine next April, and likely find a new accountant. This meeting cost me $300, which makes me think I should find a new accountant anyway. I’ve done my own taxes with a family member’s assistance in the past, but taxes give me incredible anxiety and I really don’t want to be responsible for messing this up.

Third: Buy something fun!

My 30th birthday was around the corner, so I decided to skim $750 to take a few close friends out for a nice dinner to celebrate. I ended up spending $727 on a wonderful four-course meal at a terrific local restaurant. My birthday also coincided with one friend’s long-awaited good health news, so the meal felt doubly festive. We spent so much time at the table we practically shut the place down.

Fourth: Open a money market account.

I opened a money market account at the same bank as my savings account and parked the remaining $387,302 in it. It’ll stay there until tax time next April, earning an APR of 1.75 percent, or roughly $5,083, in the meantime. (Sidenote: remember when regular savings accounts yielded as much as 5 percent? Those were the days!)

Fifth: Pay the rest of the taxes.

I won’t know exactly how much I owe in capital gains taxes until next April, but I estimate that I’ll lose roughly one-third of this money to taxes. The shares had been in the family since the 19th century, so the capital gains are significant. I’ll be hit pretty hard, tax-wise.

Of the original $394,552 windfall, I’m guessing I’ll probably end up with about $250,000 once all is said and done. Which, honestly, I’m fine with! My father has always said “it costs money to have money.” Like a lot of left-leaning folks, I think it’s incredibly messed up that capital gains are taxed at a lower rate than regular income, but that is a (much longer) post for another day.  

Sixth: ???

So, what am I ultimately going to do with this windfall? Honestly, I have no idea. (Here is where I should also disclose that I have no student loans to pay off, thanks to another random stroke of luck: I got a partial merit scholarship to college, and my parents paid the rest using money that they were left by a deceased family friend.)

The easiest thing to do with this money would be to add it to my current investment portfolio. I want to donate a portion to a charitable cause, but still need to do some more research. Ideally, I’d give to a small local nonprofit that could really benefit from a moderately sized, unrestricted donation.

I am also toying with the idea of buying an apartment. I could make a 50 percent down payment on a studio apartment where I live in NYC, but it would still be difficult to afford the mortgage, co-op fees, and taxes on my modest nonprofit salary. (Also, I’m single.) I don’t want to put down more than 50 percent, though – because although real estate is thought to be a good investment, it’s an extremely illiquid one, and I don’t want to put the majority of my eggs in one basket.

Reflecting on this whole situation, I find myself feeling both detached from and intimate with this money. I did nothing to earn it — I just won the Genetic Lottery: Family Money Edition — so I don’t feel any real sense of ownership. Still, I feel surprisingly close to (and protective of) my windfall. Those quarterly dividends have been a constant for my entire life, as reliable as the seasons. No matter where I was in the world, physically or emotionally, I could count on those checks in March, June, September, and December. Now the money has come home to roost for good, in one lump sum.

Above all else, I feel a huge sense of responsibility: perhaps if I had earned this money myself, I’d be a little more cavalier with it. But the fact that someone else gave it to me makes the stakes even higher in my eyes. If I frittered away my own hard-earned cash, I’d have no one to answer to but myself; if I squandered money that someone else passed on to me, I’d be disappointing them. I imagine that wealth feels differently to different people, but to me, it feels like a weighty responsibility. I know I am tremendously lucky, and very much want to steward this blessing well.

Anonymous lives in New York City, and will be donating her payment for this piece to charity.  

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